From consumer, to producer, to creator: A new era of IP development in China and India (2)

In the previous article, we discussed the recent development of the IP environment in China. Newly strengthened protection of intellectual property rights from the Chinese side indicates lower risk, which will likely encourage foreign investors to enter the Chinese market. On the other hand, there are also incentive programs in the US that support companies in IP-intensive industries on research and development. US companies find themselves holding a strong R&D presence in China due to the size of the Chinese market and the overall strategy to integrate local talents into their R&D operations. The High and New Technology Enterprise (HNTE) program and The Technology Advanced Service Enterprise (TASE) program, funded by the US China Business Council, are perfect examples of programs that promote innovation in US enterprises. With a stronger IP management portfolio, a company can prove itself a contender for innovation and qualify for the HNTE or TASE status.

Not only do top US companies allocate budget to R&D centers in China, they are also eyeing another country whose IP environment is beginning to take off in the last ten years: India. China and India share many similarities: they are both countries with a sizable economy and huge human capital in the transition period from advantage-seeking to innovation-building development strategies.

If we look at the world patent filings and grants from India in the recent 15 years, we can identify the overall increase in the number of patent applications, which suggests the innovative potential that India holds.

In fact, similar to the 2017 nation-wide campaign to enhance intellectual property rights protection, the Indian government’s National Intellectual Property Rights Policy in 20161 also laid the legal framework that supports the investment and growth of innovative enterprises.

China and India have arrived at a turning point where they are pushing for significant technologies that require a stronger IP environment, one that is compliant with global standards, to protect their inventions. Admittedly, there are companies in certain industries that benefited from the lack of an effective patent system in India. For instance, domestic pharmaceutical companies find themselves on the better side of the deal in a market that is expected to grow to 100 million in USD by 2025, according to the estimates of India Brand Equity Foundation. To this day, the lack of IP protection laws still presents a significant barrier to foreign pharmaceutical companies looking to enter the market due to the high-risk nature of any type of investment on R&D in this industry. Industry professionals suggest that it is imperative for the Indian government to create a certain incentive for people to invest in these areas in order to lift up the barrier.

Another IP-intensive industry that has an impact on the overall IP environment in India is information technology (IT), a key part of India’s economy. Although it is a blossoming industry that generates almost 10% of the nation’s overall GDP2, the Intellectual property outputs in the IT industry were small, due to the fact that the majority of the services provided by domestic Indian companies are at the entry level of the value-addition hierarchy3. In particular, the Indian software industry is facing the same challenge as their counterparts in the US: it is difficult to prove the patentability of computer-implemented inventions under the current IP laws4. However, according to an Indian IP Institute, there have been discussions at high levels in India about pure software patenting, but the change in patent policy will not be immediate. As enterprises in the IT industry engage more in the value-adding areas such as artificial intelligence, machine learning and blockchain technologies, and strive for innovation, they also recognize the significance of a strong IP profile. For example, the success of Wipro, a global information technology, consulting and outsourcing company, can be largely attributed to their core IP strategy which secured greater returns and created greater operational flexibility5.

The National Intellectual Property Rights policy in 2016 is coupled with another government initiative: Startup India, to inspire innovation in newly founded enterprises. This initiative offers a number of benefits to startup companies, including an 80% rebate on patent filing, lowering the cost to file each patent to just $256. According to an article published by Vantage Asia, such initiatives have contributed to a rise of approximately 10% in patent filings7. They also sought to expedite the application and examination process for each patent filed; this is also reflected in the sharp rise in the grant rate of patent filings from India in 2017, as illustrated in the graph below, which indicates the increasing quality and expedited processing of patents.

The strengthened protection of intellectual property will likely lead to high-value investments. Take the example of InMobi - a mobile ad network enterprise: since its foundation in 2007, it has expanded into the global market (especially China) and reached more than 1 billion mobile devices with their unique, patented technology. It holds 6 US patents on their core technology to ensure protection. As patent filing awareness increases, and the benefits of the policies begin to pay off, we will be seeing more startups in India pushing for innovation in an evolving IP ecosystem.

Intellectual property plays by and large a significant role in the development of SMEs. A strengthened IP environment can support SMEs in developing competitive strategies with unique product designs that attract investors. The government initiatives on protection of IPR proves an important effort in the globalization and liberalization of the Indian economy. Like start-ups, more and more SMEs in India are building their IP profiles to ensure continuous growth and profits. For large enterprises and Fortune-500s, IP is also often considered as the core of their most valuable asset. Some companies have their own team, or utilize external IP consulting firms that focus on capturing and managing IP. One of the most highly ranked Indian companies by Fortune magazine, Tata Motors, lists their IP assets and their proactive strategy to protect these assets in India and around the globe in the official statutory report. An overall healthy IP environment will increase their competitiveness internationally and help them make a global impact.